FA-12-Part 2

You want to value the company Marks and Spencer Group Plc. You project the dividends over 10 years as follow:

Year Dividend

1 18.69

2 19.62

3 20.61

4 21.64

5 22.72

6 22.49

7 19.12

8 20.07

9 21.08

10 22.13

You expect a resale price in 10 years at 360. Based on the risk of the company, you require a rate of return on equity of 7.5%.

Instead of a final resale price of 360, you now forecast a long-run growth rate of 4.2%.

- Using the Gordon-Shapiro model only , calculate the price of Mark and Spencer.

- Using the forecasted dividend values for the first ten years and the long-run growth rate after that, calculate the present stock value.